CPP fund to grow by $191B over next decade: report

Staff | September 28, 2016

The existing Canada Pension Plan is on sustainable financial footing at its current contribution rate and its assets are projected to grow from $285 at the end of 2015 to $476 billion by 2025, according to the latest actuarial report on the CPP.

The report, which is prepared every three years, was tabled in Parliament on Tuesday by Minister of Finance Bill Morneau. It covers the three years ended Dec. 31, 2015 so doesn’t reflect the proposed CPP enhancements agreed to by Canada’s governments in June.

While the report projects that the current contribution rate of 9.9 per cent is more than sufficient to cover expenditures over the period 2016 to 2020, it notes that a portion of investment income will be required to make up the difference between contributions and expenditures thereafter. In 2050, it’s projected that 26 per cent of investment income will be required to pay for expenditures.

The report also found:

The average annual real rate of return on the plan’s assets over the 75-year projection period, 2016 to 2090, is expected to be 3.9 per cent.

The number of contributors is expected to grow from 13.8 million in 2016 to 15 million by 2025.

Under the legislated contribution rate of 9.9 per cent, contributions are expected to increase from $47 billion in 2016 to $66 billion in 2025.

The number of retirement beneficiaries is expected to increase from 5.1 million in 2016 to 10.2 million in 2050.

“Experience over the period 2013 to 2015 was better than anticipated overall, especially regarding benefits and investment returns,” wrote chief actuary Jean-Claude Ménard in the report.

“However, this is largely offset by higher projected life expectancies at age 65, lower assumed real wage increases, lower inflation expectations, and changes in investment assumptions … Despite the projected substantial increase in benefits paid as a result of an aging population, the plan is expected to be able to meet its obligations throughout the projection period.”

Once legislation implementing the enhancement of the CPP is introduced in Parliament, the chief actuary will conduct another actuarial assessment, according to the report.